Alibaba shares soar on privatization plan

YvonneLee

HONG KONG -(MarketWatch)- Shares of e-commerce firm Alibaba.com (1688.HK) jumped 43% early Wednesday after resuming trade, spurred by news that its parent company plans to take the Hong Kong-listed unit private in a deal that could be worth up to US$2.5 billion.

Analysts said the privatization proposal, which needs shareholders' approval, will likely succeed given the high premium the group is offering to minority shareholders. Alibaba Group said that it is offering HK$13.50 a share for the 27% stake it doesn't already own in Alibaba.com, a 46% premium to their last traded price, and a 60% premium over the stock's 60-day average closing price. Shares in Alibaba.com were halted since Feb. 9 pending news about a deal involving its parent company. The stock closed Feb. 8 at HK$9.25 each.

At 0154 GMT, Alibaba.com surged 43% to HK$13.20 after hitting an intraday high of HK$13.26. The benchmark Hang Seng Index was down 0.5%.

In a report Wednesday, Nomura rated Alibaba.com "neutral," noting there are still some challenges facing the company including a slowdown in the economies in Europe and U.S. Alibaba.com connects buyers and suppliers online.

"Alibaba's current outlook will remain challenging," the firm said in a report. "We believe that a greater influence on performance is the company's strategy and execution."

JPMorgan said if minority shareholders do not approve, the group will not make another higher offer for at least another year.

Alibaba Group, which owns 73% of Alibaba.com, said late Tuesday it plans to take private its Hong Kong-listed online trade unit Alibaba.com as it will free it from "the pressures" of having a listed company. The deal size could be up to US$2.5 billion if it includes the buyout of options from minority shareholders. Excluding options, the deal would be valued at US$2.3 billion.

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